Venture funding up for valley startups

When venture capital funding to Silicon Valley startups slowed in the first quarter of this year while the flow of dollars to other regions picked up, industry analysts said it was no cause for alarm -- just a little geographical fluctuation.

And how. The valley's lackluster first quarter, it turns out, set the stage for a rousing rebound. With cleantech and life sciences setting the pace, Bay Area startups received a remarkable 45 percent of $6.5 billion in venture capital invested nationwide during the quarter, compared with 32 percent of $4.9 billion in the previous three months. In recent years, the region has typically collected one-third to 40 percent of venture dollars.

The Bay Area's $2.9 billion in funding was up 91 percent from the previous quarter and more than 100 percent from a year ago, with big cleantech deals as the top investments. Nationwide, funding into cleantech -- a sector that crosses various tech sectors -- increased 107 percent over the previous quarter to $1.5 billion.

The Bay Area also accounted for seven of the 10 largest deals in the second quarter, topped by $350 million for the electric automotive startup Better Place, which is based in Palo Alto but largely operates overseas, and $150 million for Oakland-based BrightSource Energy, a developer of utility-scale solar power.

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Meanwhile, funding in the life sciences sector, which combines biotechnology and medical devices and equipment, also surged, jumping 52 percent in dollars and 36 percent in deals from the previous quarter to $2.1 billion going into 234 deals.

There were also notable investments in health-related information technology, with San Francisco-based Castlight Health raising $60 million for its commercial rollout of comparison shopping for health care. It was the sixth-largest deal during the quarter.

The overall surge in funding lifted the first half of 2010 to $11.4 billion in venture funding going into 1,646 deals -- a 49 percent increase in dollars and a 23 percent increase in deals from the first half of last year, when $7.7 billion was invested in 1,340 deals.

But another fluctuation could be coming. A recent survey of Silicon Valley venture capitalists showed that their mood had dimmed for the first time since the depths of the financial crisis.